02 August 2012

The battle for green growth

Some people consider the phrase "green growth" to be an oxymoron. Others (like me) see it as an outcome of good economics (i.e., internalizing externalities).

The World Bank has an interesting report on the topic that lists a few barriers to green growth:
  1. Existing stocks of capital goods, intellectual property, culture, etc. create path dependency. The costs and benefits of a move to a "greener" option may be distorted by these stocks, such that suboptimal decisions result.
  2. People consuming for social and/or competitive reasons may do so regardless of costs or greenery (think of teenagers smoking or racing their cars to be cool).
  3. A past of cheap prices on "brown" consumer goods may lead to consumption habits that will persist, even in the face of price changes to reflect "green" choices.
Bottom Line: The shadow of the past lies heavily on present changes in policy that are designed to move us to a better future.


  1. Good summary of our frustrating reality.

    What are the agents of change that jolt us out of path dependency?

    Here in Florida (the Sunshine State) they are building nuclear reactors, one being considered is made by GE. Yet this week the CEO of GE told the Financial Times nuclear makes no economic sense (saying nothing about environnemental sense) when compared to natural gas and solar. Is crony capitalism that rampant?

  2. @Brad -- depends on who's paying. The worth of crony capitalism is when Politician A uses money from citizens in Community B. It's NOT crony capitalism if nukes are the best choice and/or the business loses money for failure to perform...

  3. Here in Florida the utility, FPL, has spent tons of money on contributions to politicians that carry their agenda and threaten to heavily support candidates against incumbents who oppose FPL. With heavy contributions to politicians, repeal Renewable Energy Credits and conservation programs and law providing for 110% public funding of nuclear power was passed into law (extra 10% for profit margin). To me, it fits the definition below...especially here in the Sunshine State where no one has solar PV and every incentive to jump start the market has been repealed.

    Definition of 'Crony Capitalism'
    A description of capitalist society as being based on the close relationships between businessmen and the state. Instead of success being determined by a free market and the rule of law, the success of a business is dependent on the favoritism that is shown to it by the ruling government in the form of tax breaks, government grants and other incentives.

    Read more: http://www.investopedia.com/terms/c/cronycapitalism.asp#ixzz22axuk8n2


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